April Home Prices Spiked; Sales Dipped
Anxious buyers bid up home prices in the San Fernando Valley in April, pushing the median price for a single-family home to $240,000, a whopping $17,000 jump over the March figure and a scant $5,000 shy of the region’s record high, a real estate report said Monday.
It was the largest month-to-month dollar gain and percentage hike--7.6%--in the past five months, and the sales activity nudged single-family home prices to within 2 percentage points of the all-time high of $245,000 set in 1989.
This is the closest prices have been to that high-water mark since June of 1991--before the twin tremors of earthquake and recession rocked the local real estate market to its foundation.
While the actual number of sales dipped in April--down nearly 2% compared with March and down 9.1% from the year-ago period--the players who stayed in the game showed that they were ready to fork over larger amounts of money. Analysts said many buyers were trying to get a foot in the front door now, before the Fed raises interest rates even more and before a supply-starved market gets even tighter.
Some of the current price rise is “courtesy of Mr. Greenspan,” said Jim Link, executive vice president of the Southland Regional Assn. of Realtors, referring to Federal Reserve Chairman Alan Greenspan’s policy of raising interest rates to try to stave off inflation. Fed policymakers meeting today are expected to hike key interest rates by another half percentage point.
“But I think it’s really a case of supply and demand,” added Link, whose real estate trade group issued the monthly report. “The supply is so short that prices have to rise because buyer demand is definitely there.
“This is really a case where buyer demand outpaces the new supply, so [homes] are getting gobbled up very quickly.”
Nearly 1,110 single-family homes changed hands last month, down from 1,208 in April 1999, and down 1.6% from March.
The Valley figures track trends seen throughout Los Angeles and Orange counties. Figures released last week for Los Angeles County showed that the median price--the point at which half the homes sell for more and half for less--rose 4.3% from April 1999, to $195,000. In Orange County, the median jumped 13% from a year earlier--the highest percentage gain since August 1998.
Barring a major stock market meltdown, and if rising interest rates don’t scare off too many buyers, Link thinks the Valley median may hit $245,000 later this year.
But Kerry Gelbard, managing partner of brokerage ReMax Centre in Encino, does not see this as a superheated market and said he feels the price appreciation is merely the region’s consistent climb back to its previous highs.
“I don’t see the sharp increase that you’re talking about, and I don’t hear a lot from other Realtors saying they just can’t believe these prices,” said Gelbard, whose firm has more than 100 Realtors.
“I have seen prices recover from the downturn of the early ‘90s,” he added. “I don’t know that we’re seeing runaway price increases. I think it’s very consistent.”
If so, prices are consistently higher than they’ve been in years.
Association figures show that for six of the past eight months, the median price has topped $220,000, and in a seventh month the price missed that mark by a mere C-note. It’s the first time the Valley has seen sustained prices at that level since 1992.
April’s price tag represented an $85,000 gain--or 55%--over the region’s low point of $155,000 set in February 1997.
And while that’s good news for homeowners who had been bemoaning their equity deficit, it’s bad news for many low- and moderate-income families seeking homeownership.
Robert Gnaizda, policy director for the public advocacy group the Greenlining Institute, notes that the rising prices, coupled with steadily escalating interest rates, are putting a financial moat around homeownership for many.
He noted that on a typical $200,000 home, the cost, due to interest rate hikes, “has gone up, on average, $345 a month in the past year and half.
“I think [today’s expected] interest-rate hike is going to make homeownership unavailable to an increasing number of people in Los Angeles and the state,” he said.
Continuing a trend seen last year, price hikes in the single-family market have proven to be a boon for condo sellers.
There was a 31.1% jump in the number of condos sold--434, up from 331 in April 1999. The gain over March was a robust 14.5%.
“With prices rising 12%, 15%, 18% a year, the buyers at the moderate to lower end of the market are being affected,” said Leslie Appleton-Young, vice president and chief economist of the California Assn. of Realtors, the statewide trade group. CAR predicts that the statewide median price will rise by 12% for the year, accompanied by an 8% drop in the number of sales.
“They may have to go out of the county, to Riverside County, or they may have to buy a condo.”
Even the ever-expanding Santa Clarita Valley was touched by April’s sales slowdown--192 homes changed hands, down 27.3% from April 1999, but up 11.6% from the 172 homes sold in March. The median price rose a modest 6.7% to $240,000, compared with the year-ago period. Meanwhile, 121 condos were sold, up 2.5% from the 118 sold in April 1999, and up 5.2% from March.
Noting that April sales represent escrows that opened in February or March, typically slow months, Appleton-Young cautioned against making too much of the sales drop in the San Fernando Valley.
Still, she said, there may be a change in the air.
“It’s possible that we’re seeing a turning point in the market, toward a lower level of sales activity,” Appleton-Young said. “You don’t want to go overboard making conclusions based on one month, but this could well signal a transition to a slower, less hectic pace of transactions.”
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Rising Prices
The median price for a single-family home in the San Fernando Valley continues to rise, with the April figure coming to within $5,000 of the region’s all-time high.
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Source: Southland Regional Assn. of Realtors
